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Lithuania: EU launches wide-ranging WTO case against China trade blockade

The EU has moved faster than expected in launching a legal dispute at the World Trade Organization in relation to Chinese restrictions on exports from Lithuania following a political row with the country related to the opening of a representative office for Taiwan in Vilnius last year.

The move is part of a wider diplomatic effort to resolve the standoff that not only harms Lithuania directly but is seen in Brussels as an assault on the integrity of the EU’s single market.

In its formal request for consultations sent to the Chinese ambassador to the WTO circulated today, the European Commission is in particular seeking clarity and redress over what the EU says is an unspoken ‘blockade’ of Lithuanian exports.

The measures at hand include: “error messages on the IT systems used to input data necessary to secure customs clearance from the Chinese customs authorities”, “containers being blocked in Chinese ports pending customs clearance” and “failures on the part of the Chinese customs authorities to process requests for customs clearance in due time or at all.”

The Commission further criticises “export bans or export restrictions on the products at issue from China to the EU” and “restrictions or prohibitions on the supply of services from the EU or by a service supplier from the EU in the territory of China or in respect of EU consumers of services provided by Chinese service suppliers.”

The EU talks of a “complex of measures” that are “interlinked”. The EU says that these restrictions are “novel, numerous, recurrent, persisting and strongly correlated in temporal and substantive terms, as well as in terms of the provenance of the goods”.

Diplomatic efforts continue

The EU has said it continues to seek a diplomatic, amicable solution to the dispute. Requesting consultations at the WTO is part of this diplomatic effort.

“We continue the diplomatic engagement to find a solution amicably,” said European Commission vice-president Valdis Dombrovksis.  “The WTO move is against the economic coercive measures applied” by China.

EU diplomats in Beijing are seeking to organise a bilateral EU China summit and a new meeting of the High Level Economic and Trade Dialogue, a regular meeting with Commission vice-presidents and their counterparts in China that often precede a summit and prepare the ground for it.

However there is no date set for any such meetings to date. China currently has no ambassador in Brussels, making the task more arduous for Europeans.

Another geopolitical WTO case

This case is another one in a series of recent trade disputes in the WTO where wider political and national security issues are at stake.

Some experts believe China could invoke the GATT’s Article XXI national security exception in this case, making it more difficult for panellists to adjudicate.

WTO legal precedent does not preclude a panel ruling on substance, i.e. on whether Article XXI is justified as in a case involving a Russian blockade of Ukrainian exports in transit to Central Asia during the 2014 conflict. WTO arbitrators have tended to give a lot of leeway to the country invoking Article XX.

In its legal submission, the EU is not raising the political issue, but is discussing a range of procedural rules enshrined in the WTO rule-book.

This echoes an approach taken by Australia in a case it brought against Chinese anti-dumping duties on wine in the autumn 2021, which are believed to be part of a wider Chinese blockade against Canberra’s criticism of China’s handling of the COVID-19 virus outbreak.

The EU is invoking a large set of WTO norms related to discrimination (treatment of like products, Article I of the GATT), transit (Article VI of the GATT), lack of impartiality and uniformity in the implementation of administrative measures, the use of other trade restrictions than those permitted and regulated in the WTO (notably tariffs).

Trade law experts will also note that the EU is invoking the Trade Facilitation Agreement on matters related to customs clearance. It also refers to rules enshrined in the SPS agreement on food exports and the GATS for services exports. In the latter case measures the EU is bringing to adjudication include the blocking financial transfers to and from Lithuania.

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